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Business Combination | 9 Months Ended
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Sep. 30, 2025
Business Combination [Abstract] |
BUSINESS COMBINATION | NOTE 4: BUSINESS COMBINATION Evoke Neuroscience, Inc. On April 30, 2025, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with Evoke Neuroscience, Inc. (“Evoke”) and stockholders of Evoke (the “Sellers”) to increase Firefly Neuroscience, Inc.’s capacity and expand its customer base. The Sellers sold and the Company purchased all of the issued and outstanding shares of Evoke, for a total purchase price consisting of: (i) $3,000 in cash (the “Cash Purchase Price”); (ii) shares of the Company’s common stock having an aggregate value of $3,000 priced at $3.50 per share (the “Shares”); and (iii) an earn-out payment in the form of additional shares of the Company’s common stock with an aggregate value of $500, contingent upon the achievement of specified revenue targets during a thirty-six (36) month earn-out period, all as further described in the Securities Purchase Agreement (the “Earn-Out Shares,” and collectively with the Cash Purchase Price and Share Consideration, the “Purchase Price”). Each Seller agreed not to sell, transfer, or otherwise dispose of any Shares, or engage in any transaction that would transfer the economic benefits of the Shares during the Lock-Up Period (the “Lock-Up Period”) without the prior written consent of the Company. The Lock-Up Period began on the closing date and will end on the earlier of (a) six months after the closing date or (b) the effective date of a registration statement filed by the Company with the SEC covering the resale of the Shares. The Lock-Up Period expired on October 31, 2025. The transactions contemplated under the Securities Purchase Agreement were closed on May 1, 2025, which were subject to customary closing conditions, including, without limitation, the completion of mutually satisfactory due diligence; compliance with applicable regulatory requirements; the Company entering into a satisfactory consulting agreement with the former CEO of Evoke; Evoke having no outstanding debt or liabilities in default; the receipt of any required shareholder approvals; and the delivery of evidence of debt payoff from the Company’s loan holders. The aggregate purchase price was $6,221, which consisted of: (a) $3,000 in cash; (b) 857,142 shares of Company common stock with an acquisition date fair value of $2,743; and (c) a liability associated with the Earn-Out Shares with an acquisition date fair value of $478, subject to the conditions described above. The Company engaged a third-party independent valuation specialist to assist in the determination of fair values of intangible assets acquired and liabilities assumed for Evoke. The final determination of the fair value of assets and liabilities will be completed within the one-year measurement period as required by ASC 805. The acquisition will necessitate the use of this measurement period to adequately analyze and assess the factors used in establishing the asset and liability fair values as of the relevant acquisition date. The allocation of the purchase price has been prepared on a preliminary basis, and changes to the allocation of certain assets and liabilities may occur as additional information becomes available. The primary areas of the purchase price that are not yet finalized are related to the valuation of, Developed technologies, Trade names, Non-compete agreements, Customer lists, Deferred revenues, and Goodwill.
|  | Purchase Price |
|  | Allocation |
Purchase Consideration: |  |  |
Cash |  | $ | 3,000 |
Common stock |  |  | 2,743 |
Earn-Out Shares |  |  | 478 |
Total Purchase Consideration |  | $ | 6,221 |
Less: |  |  |  |
Developed technology |  | $ | 700 |
Trade name |  |  | 150 |
Non-compete agreements |  |  | 110 |
Working capital |  |  | 139 |
Security deposit |  |  | 3 |
Deferred revenue, non-current portion |  |  | (56 | )
Fair Value of Identified Net Assets |  | $ | 1,046 |
Goodwill |  | $ | 5,175 |
In connection with the acquisition of Evoke, the Company acquired intangible assets in the form of developed technology, a trade name and non-compete agreements. The Company used the relief from royalty method when determining the fair value of the acquired trade name and developed technology. The fair value was determined by applying an estimated royalty rate to revenues, measuring the value the Company would pay in royalties to a market participant if it did not own the trade name and developed technology and had to license it from a third party. The trade name was assigned a useful life of 3 years as the company is expecting to transition the Evoke system under the Firefly product umbrella. The internally developed technology was assigned a useful life of 9 years. The Company used the postulated loss of income method when determining the fair value of the non-compete agreements. The non-compete agreements were assigned a contractual useful life of 5 years. Significant assumptions included a discount rate of 15%, royalty rates of 3.5%, and an assumed income tax rate of 26.5%. The fair value of working capital accounts was determined to be their carrying value due to the short-term nature of the assets and liabilities. The contingent consideration associated with the Earn-Out Shares of $478 reflects the estimated fair value, at the acquisition date, of contingent future cash payments of up to $500 to the Sellers under an “earn-out” provision of the Securities Purchase Agreement. The Company determined the estimated acquisition date of fair value of the contingent consideration using a Monte Carlo simulation. Significant assumptions included a discount rate of 3.5% and an assumed income tax rate of 26.5% as well as projected net sales derived from internal forecasts and a three-month revenue volatility rate of 1.6%. This contingent consideration of liability will be remeasured at fair value for each reporting period until the contingency is resolved, with changes in fair value recognized in operating expenses. During the nine months ended September 30, 2025, the Company recognized a loss on change in fair value of contingent consideration of $3. Significant assumptions included a discount rate of 3.6% and an assumed income tax rate of 26.5% as well as projected net sales derived from internal forecasts and a three-month revenue volatility rate of 2.4%. The components of working capital as of the acquisition date are as follows:
Current assets: |  |  |
Cash |  | $ | 599 |
Accounts receivable, net |  |  | 45 |
Inventory |  |  | 104 |
Total current assets |  | $ | 748 |
Less current liabilities: |  |  |  |
Accounts payable |  | $ | 280 |
Accrued expenses and other current liabilities |  |  | 137 |
Deferred revenue |  |  | 192 |
Total current liabilities |  | $ | 609 |
Net working capital |  | $ | 139 |
Goodwill was recorded based on the amount by which the purchase price exceeded the fair value of the net assets acquired and the amount is attributable to the reputation of the business acquired, the workforce in place and the synergies to be achieved from this acquisition. Goodwill of $5,175 from the acquisition of Evoke is not expected to be deductible for income tax purposes. The condensed consolidated financial statements of the Company include the results of operations of Evoke from April 30, 2025 to September 30, 2025 and do not include results of operations for periods prior to April 30, 2025. The results of operations of Evoke from April 30, 2025 to September 30, 2025 included revenues of $548 and a net loss of $12. The following table presents the unaudited pro forma condensed consolidated results of operations for the three and nine months ended September 30, 2025 and 2024 as if the acquisition of Evoke occurred at the beginning of fiscal year 2024. The pro forma information provided below is compiled from the preacquisition financial information of Evoke and includes pro forma adjustments to give effect to (i) amortization expense associated with the acquired intangible assets. The pro forma results are not necessarily indicative of (i) the results of operations that would have occurred had the operations of this acquisition actually been acquired at the beginning of fiscal year 2024 or (ii) future results of operations.
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
|  | 2025 |  |  | 2024 |  |  | 2025 |  |  | 2024 |
Revenues |  | $ | 388 |  |  | $ | 572 |  |  | $ | 1,229 |  |  | $ | 1,641 |
Net loss |  | $ | (2,639 | ) |  | $ | (4,353 | ) |  | $ | (17,628 | ) |  | $ | (6,884 | )
As of the date of the acquisition, the Company expected to collect all contractual cash flows related to receivables acquired in the acquisition. Acquisition-related costs of $50 were expensed as incurred and are recorded within general and administrative expenses on the condensed consolidated statements of operations.

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